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'From Policy to Practice'

'From Policy to Practice'

by Mirea Raaijmakers

Former Global Head of Behavioral Risk, ING

May 17, 2021

Compendium

A: One of the lessons that could be drawn from the financial crisis and major incidents in the financial sector is that employee behaviour and culture greatly affect the soundness, risk profile and integrity of financial institutions. Answers had to be sought in employee behaviour, going beyond organizational structure and processes. Behavioural problems often already exist before problems in the performance of the organization come to light. Therefore, by identifying and tackling ineffective behaviour and an unhealthy culture at an early stage, major financial and non-financial risks can be prevented. The basis for understanding human behaviour draws on evolutionary, cognitive and social psychology. These fields are increasingly considered in combination with economic concepts to understand what drives, and what prevents, behavioural change. So, what can I say? It’s a clever decision DNB made back then...

A: That it adds a lot of value to financial institutions and supervision to include this behavioural lens in risk management. It requires both supervisors and financial institutions to focus on root causes of performance, and how integrity elicits conversations more focused on sustainable impact and behavioural change. I have seen an increasing awareness of the importance of culture and behaviour, and a shift from ‘why is this important to address’ to ‘how can we address this effectively.’ Willingness to change has increased over time as well. There’s still a lot to do, but nobody doubts that these topics are here to stay.

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